Van Rompuy: financial tax to form part of EU budget

The much vaunted EU financial transaction tax (FTT) is set to be hard-wired into the EU budget, with most of its revenue going directly to the EU.

A paper prepared by EU Council President Herman Van Rompuy and sent to European capitals ahead of next week's EU budget summit, where leaders aim to agree a mandate on the budget framework for 2014-2020, would deduct FTT revenues from national contributions to the annual EU pot.

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He has proposed a cut of €75 billion in commitments from the text put forward by the European Commission, leaving total commitments at €973 billion - a €20 billion reduction on the €993 billion agreed for the 2007-2013 period.

The European Commission had tabled an initial proposal for an EU FTT to apply to the eurozone in autumn 2011.

The initiative stalled following opposition from a handful of countries.

But in October, the EU executive agreed to demands by 11 states, led by Germany and France, to re-table an FTT bill using the "enhanced co-operation procedure."

This rule allows a group of countries within the EU to adopt legislation between themselves without affecting the rest of Europe.

Under Van Rompuy's plan, two thirds of FTT revenues from each country would be transferred to the EU budget, with the national contributions made by member states reduced accordingly.

Countries not using the FTT would not be affected by the change.

While the Van Rompuy paper does not spell out precise figures on the revenue expected to be generated by an FTT, the impact assessment to the Commission's original proposal estimated annual revenue of €57 billion coming from levies of 0.1 percent on bond trading and 0.01 percent on derivatives trading.

The EU budgets between 2014 and 2020 are expected to be worth around €140 billion a year on average.

Although just 11 countries have to date confirmed that they will use an FTT, with the new Dutch government currently weighing up its options, other EU countries can still block the legislation if they wish.

None has indicated that they will do so.

The European Parliament, which has campaigned concertedly for an EU FTT since the start of the 2009-2014 legislature, can only give a non-binding opinion on the bill.

The Van Rompuy paper, which will form the reference point for talks on 22 and 23 November, attempts a fine balance among member states - who are divided on whether to cut overall spending and on policy priorities - and for the European Parliament, which can veto the budget.

EU diplomatic sources voiced hope that the proposal would be welcomed by MEPs, with one official commenting that "changing the system on own resources is big for the parliament."

In a resolution adopted at the October Strasbourg session, MEPs said that an FTT and a new EU VAT levy could reduce direct GNI-based contributions to the EU budget to 40 percent by 2020.